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ANALYSIS OF FINANCIAL STATEMENTS

Financial statement analysis is the study of relationships between the elements of the same statement or different financial statements and the trend of these elements. The purpose of financial statement analysis is to determine the meaning and significance of the data contained in the statements so that a forecast may be made of the prospects for future earnings, expected dividends and the ability of the business to pay interest and debt as it matures. Financial statement analysis involves rearrangement of financial information, comparison, analysis and interpretation of that information.

Financial statement analysis can be external or internal; horizontal or vertical; and intra-firm or inter-firm.

Analysis done by the management to assess the financial health of the organization and its operational efficiency is called internal analysis. Analysis carried out by parties external to the organization such as investors, credit rating......

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Approximate Word Count: 3339
Approximate Pages: 14 (250 words per double-spaced page)

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